By POGO STAFF

Today, POGO will be offering rolling analysis of President Obama's Fiscal Year (FY) 2013 budget, which is available here. The budget is a blueprint for the initiatives the President would fund if he was unconstrained by Congress. Congress may use the budget as a starting point for appropriations, but also has the capacity to ignore Obama's suggestions and will likely change some of the levels of funding if it passes appropriations bills for FY 2013 (Congress has had trouble doing so on time in some years).

We’ll also be looking for signs of a reduction in spending on service contractors. In our Bad Business report released last fall, we estimated that for 35 comparable job occupations examined, service contractors cost taxpayers on average nearly twice as much as in-house government workers (for a discussion of data and analytical limitations in our report, go here).

Finally, we think it’s vital that President Obama invest federal spending transparency and in the nation’s watchdogs: the Office of Special Counsel, the Government Accountability Office, and the Offices of Inspectors General—an analysis of these budget requests on these watchdogs will come later this week.

Check back for more on this page throughout the day!

Chemistry and Metallurgy Research Replacement-Nuclear Facility

By the numbers: FY2012: $200 million | FY2013 request [page 26]: $35 million

The Tea Leaves (11:11 a.m.): Rumblings in the press indicate that the Department of Energy’s proposed nuclear facility at Los Alamos National Laboratory will likely be delayed. As the Albuquerque Journalreported yesterday, the budget is expected to cut funding for the Chemistry and Metallurgy Research Replacement-Nuclear Facility, which, at estimated cost of $3.7 to $5.9 billion, would enable the U.S. to increase production of the primary component in nuclear weapons. Meanwhile, the budget is expected to increase funding for the Uranium Processing Facility in Tennessee, a nuclear facility with an estimated cost of $6.5 to $7.5 billion. As the Journal noted, President Obama conceded to Congress to fund both projects when he signed the New START agreement with Russia, which places limitations on the number of deployed nuclear weapons both countries can possess. POGO called for an end to funding UPF in our Spending Less, Spending Smarter recommendations.

Analysis (12:29 p.m.): In a report we issued last month, POGO called for the cancellation of CMRR-NF, a proposed $3.7- to $5.9-billion nuclear facility with a skyrocketing cost estimate and no clear mission—other than to enable the increased production of a nuclear weapon component the United States already stockpiles by the thousands.

The Administration appears to have heeded our wisdom: it dramatically slashed the project’s budget by $165 million for the coming year and will defer construction for at least five years. Turns out the National Nuclear Security Administration (NNSA) “determined in consultation with the national laboratories that existing infrastructure in the nuclear complex has the inherent capacity to provide adequate support” for CMRR-NF’s missions, after all—something POGO argued existed in our report.

As a result of NNSA’s new plan to perform plutonium chemistry and physics at existing facilities at the Los Alamos and Lawrence Livermore national laboratories, taxpayers will end up saving approximately $1.8 billion from 2013 to 2017. The NNSA will instead spend the project’s $35 million for 2013 on processing, packaging and disposing of excess nuclear materials.

Analysis (3:05 p.m.): The National Nuclear Security Administration has more than doubled funding from last year to accelerate construction of another proposed project: the Uranium Processing Facility (UPF) at the Y-12 National Security Complex in Tennessee. The necessity of UPF is questionable (as POGO noted in a report calling for UPF’s cancellation, an existing facility could take on UPF’s enriched uranium processing mission at a fraction of the cost), and the price of the facility is now a staggering $6.5 billion, according to NNSA estimates [page 244]. And that’s just an estimate: “Consistent with NNSA’s increased emphasis on project management rigor,” we won’t even know the project’s finalized cost until 90 percent of the design is completed.

B61 Life Extension Program

By the numbers: FY2012: $223 million | FY2013 request [page 52]: $369 million

Analysis (4:41 p.m.): A couple of weeks ago, POGO told Defense Secretary Leon Panetta that American taxpayers shouldn’t have to pay the $2.1-billion price tag of putting 200 B61 nuclear bombs in Europe through a Life Extension Program (LEP). However, the B61 LEP is going forward, and the funding request for upgrading all B61s (not just the ones in Europe) has been increased by $146 million over last year’s appropriation. It appears the Obama administration would have American taxpayers continue to bear the burden of upgrading the European-based bombs. POGO recently learned that the total estimated cost of the B61 LEP–to occur over several years–increased from an estimated $4 billion last summer to $5.2 billion.

Analysis (2/14, 11:20 a.m.): While the budget shows decreased funding for construction of the MFFF in South Carolina, overall funding for plutonium disposition—that is, turning weapons-grade plutonium into fuel for nuclear reactors—has increased from $206 million in FY2012 to $499 million in FY2013. However, as POGO pointed out, the only buyer of the fuel produced by MFFF has backed out, and canceling the facility could save taxpayers $2 billion. The bottom line is that the President missed an opportunity to put an end to a billion-dollar project that has zero customers for the product it was designed to sell.

How the Pentagon describes this budget item: “Supports procurement of 17 MV-22 aircraft for the Navy and 4 CV-22 aircraft for Air force-USSOCOM. The procurement objective is 458 aircraft: 408 MV-22 aircraft for the Navy (Navy (50 / Marine Corps (358)), and 50 CV-22 aircraft for Air Force USSOCOM. The request is based on a follow-on 5-year multiyear procurement contract for FYS 2013 to 2017.”

Analysis (1:53 p.m.): The President’s budget fully funds the procurement of 21 Ospreys in FY2013. While this is 6 below the expected procurement of 27, it is part of a multiyear procurement contract, which POGO/TCS recommended the DoD not enter into.

The Osprey is simply neither cost-effective nor as operationally effective as it is required to be. According to the Government Accountability Office (GAO) in 2009, the V-22 costs over $11,000 per hour to fly. The Navy states that "Compared to FY-10, the cost-per-flight-hours decreased 13 percent during FY-11,” according to Inside the Navy, and that the aircraft had a mission-capable rate of 56 percent compared to its requirement of 82 percent.

Although procuring 21 instead of 27 Ospreys will save taxpayersapproximately $500 million, had the President opted to end procurement of this overpriced, underperforming weapon in favor of cheaper alternatives, he could have saved taxpayers approximately $12 billion over the next ten years.

How the Pentagon describes this budget item: “Restructures the Joint Strike Fighter Program to reduce concurrency. The budget procures 29 aircraft: 4 CV for the Navy, 6 STOVL for the Marine Corps, and 19 CTOL for the Air Force in FY 2013.”

Analysis (2:03 p.m.): Following release of the Pentagon’s “Concurrency Quick Look Review” of the F-35, which POGO made public for the first time in December, there was significant momentum within the Pentagon to slow procurement of the aircraft until a number of issues could be resolved. The Review called into question the JSF's high level of "concurrency"—the practice of procuring units of a weapon system before it's fully developed and tested.

The President’s budget reflects this report's findings and significantly reduces the planned procurement of the F-35 in the near-term. The 29 F-35s scheduled to be procured in FY 2013 is 13 below the 42 that were previously planned to be procured in the coming year. This reduction in planned procurement will save taxpayers more than $1 billion in procurement costs in FY2013.

How the Pentagon describes this budget item: "Funds four LCS seaframes at $1.8 billion and procurement of three mission modules (1 Mine Countermeasures and 2 Surface Warfare)."

Analysis (1:36 p.m.): Despite a plethora of problems with both variants of the littoral combat ship and the Pentagon’s pledge to reduce procurement by two ships in the Future Years Defense Plan, the President’s budget fully funds this program.

The Pentagon’s Director of Operational Test & Evaluation recently reported that the “LCS is not expected to be survivable in a hostile combat environment,” and some believe that having two distinct variants of the ship will lead to higher costs, despite the Navy’s assurances to the contrary.

Had the President eliminated one variant of this ship (as POGO/TCS recommended), and procured only two ships of that one variant this year (instead of two of each of the two variants), taxpayers could have saved nearly $1 billion dollars in FY2013.

How the Pentagon describes this budget item: “Provides system technical support to complete the final M1A2 Abrams System Enhancement Package (SEP) production, fielding, and training.

Analysis (2:24 p.m.): In an effort to keep the M1 tank line “hot,” the House appropriated an additional $272 million beyond the DoD’s request in FY 2012—the definition of an earmark for many Members of Congress and much of the public. POGO/TCS recommended that funding for this porker be cut, noting that “the Army already has 1,547 of these tanks in active combat units and has not indicated a need for increasing production.” A recent nonpublic RAND study concluded "that the Abrams tank production plant in Lima, OH, should be mothballed to save money," according to Inside the Army, a trade publication. The Pentagon’s request for FY 2013 is a welcome attempt to close out the tank’s production line.

How the Pentagon describes this budget item: “Funds first year of construction funding for USS John F. Kennedy (CVN 79).

Analysis (4:51 p.m.): The President’s request funds first year construction of the USS John F. Kennedy, which is the second of the Ford class “supercarriers” that will replace the current Nimitz class carriers.

POGO/TCS recommended reducing the carrier fleet from 11 to 10 ships by decommissioning the USS George Washington in 2016, and not replacing it with a new Ford class supercarrier, such as the USS John F. Kennedy. In line with this recommendation we applauded the Navy’s announcement in August that it will effectively cut one carrier strike group—which usually consist of an aircraft carrier, as many as 70 aircraft, and an escort fleet of a few cruisers, destroyers, and frigates. As the CBO has noted, “Recent experience suggests that the Navy mobilizes 5 to 7 carriers to fight a major war, and the 10 carriers remaining in the fleet under this option would still provide a force of at least 5 or 6 carriers within 90 days to fight such a war.”

It’s unclear whether continued funding of this carrier reverses the plan to cut the carrier fleet or if this new ship will simply be part of the newer, smaller carrier fleet. As the Center for Strategic and Budgetary Assessments asks: “If further cuts in the overall defense budget are required, will a carrier be the next thing to go?” If so, taxpayers would save at least $7 billion over the next ten years.

How the Pentagon describes this budget item: "Supports the development and testing and deployment of 26 GBIs at Fort Greely, Alaska, and 4 at Vandenberg Air Force Base, California. Completes post flight test analysis of the Flight Test Ground Based Interceptor – 06b mission and concludes the GMD Return To Intercept program. Continues manufacturing of Capability enhancement II GBIs and upgrades to the deployed Capability Enhancement I GBIs…"

Analysis (3:54 p.m.): The President’s request is about $250 million less than the appropriations level for the GMD program for FY2013. The program is designed to intercept incoming missiles in the middle portion of their trajectories to U.S. targets.

As the Congressional Budget Office (CBO) has noted, critics argue that “testing of the system to date has been insufficient to verify that it will function as intended.” CBO has suggested eliminating phases of the GMD program that would expand missile interceptors in Alaska and establish new ones in Europe until current systems are proven. This would still permit development of interceptors to protect the U.S. against missiles from Iran and North Korea, the main concern of the GMD program. Thus, POGO and TCS recommended freezing deployments of parts of this system until it has proven itself in testing. Doing so could save an estimated $1 billion in FY2013, according to CBO.

How the Pentagon describes this budget item: “Initiates the procurement of the block buy of space vehicles #5 and #6 under the Efficient Space Procurement (ESP) acquisition approach (formerly, the Evolutionary Acquisition for Space Efficiency (EASE)). Continues the Space Modernization Initiative (SMI) for future space vehicles.”

Analysis (5:31 p.m.): SBIRS is a system of satellites designed to provide initial warning of a ballistic missile attack. There are already four large satellites in orbit that operate the SBIRS system and the President’s request would add two more. POGO and TCS recommended adopting a “distributed architecture” approach that fields many smaller, cheaper satellites and truncating the SBIRS program now that there are the first four satellites. Had the President done so, taxpayers could have saved nearly $1 billion in FY2013, according to our estimates. The President’s request is slightly lower than FY2012 appropriations levels.

Troops in Europe

Caption via the Army: "Soldiers from the 511th Military Police Platoon in Camp Darby, Italy make sure everyone stayed safe at the Independence Day celebrations at the American beach."

Analysis (2:23 p.m.): There are currently more than 80,000 U.S. troops stationed in Europe. The Pentagon’s plan to shift focus from Europe to the Asia/Pacific region includes the elimination of eight combat brigades, at least two of which will come from Europe. While the planned reduction is below the 20,000 troops POGO and TCS recommended withdrawing, the Pentagon’s planned reductions to end strength—in Europe everywhere else—will save taxpayers $774 million in FY 2013.

Service Contractors

Analysis (2/14, 1:45 p.m.): In the budget release yesterday, the DoD Comptroller’s office claims a number of savings related to service contracts. Specifically, strategic sourcing, better buying practices, and streamlining installation support will purportedly result in a total savings of $12.8 billion in FY2013. But this is still a drop in the bucket. According to the Comptroller, the DoD spends nearly $250 billion on service contractors every year—more than it spends on all uniformed and civilian military personnel combined.

Source: DoD

The budget follows the Pentagon's announcement last month (in its “Defense Budget Priorities and Choices” document) that it would be cutting service contracts.

If recent history is any indication, there is ample reason to question whether DoD can effectively implement its plans to meet yesterday’s budget projections. According to the Comptroller’s own estimates, barely half of all DoD contracts are awarded competitively, and this percentage dropped by 4 percent from FY2010 to FY2011. This at a time when President Obama has emphasized more competition in contracting.

The President’s budget request detailed a plan for cutting service contract costs across the entire government, not just at the Pentagon:

Agencies have reviewed their requirements for management support services and other advisory contracts to evaluate where they can buy less, pay lower rates, and, whenever possible, acquire these services using fixed-priced arrangements that create a greater incentive for efficiency. For example, the General Services Administration (GSA) plans to replace time and materials contracts with fixed price contracts, and to maximize the use of less-costly labor categories where cost reimbursement contracts are necessary.

But, even this may be paying little more than lip-service to this multi-billion dollar problem, according to POGO’s General Counsel Scott Amey, who has been analyzing service contracts for the past decade.

“This will result in small savings related to better deals and switching contract type, but it isn't necessarily a cut in service contracting. These reforms don’t change the fact that ceilings on government FTE’s [Full Time Equivalents], cut the DoD civilian workforce, and attrition caused by retirements encourages the Pentagon to hire expensive service contractors,” said Amey.

Unfortunately, there is no line-item in the DoD—or any other agency’s—budget request for service contracts (although certain agencies and certain parts of agency budgets are more prone than others to fund service contracting). But, we know they are prevalent in nearly every corner of the federal government, and cost taxpayers more than $320 billion annually, according to USASpending.gov. Thus, adopting the POGO/TCS recommendation to cut spending on service contracts by 15 percent could save taxpayers more than $300 billion over the next ten years.

Implementing this recommendation requires more constraint when awarding contracts and in determining what and how to contract out. More effective competition and contract oversight can lead to savings, but, as POGO found in its Bad Business report last fall, sometimes keeping work in the hands of government workers is the more cost-effective choice.